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Estimated Tax Payments: Do You Have to Pay?

Most people get tax refunds from the government. But if you don't pay enough in tax upfront, then you can end up having to pay penalties for failing to make estimated tax payments. How can you figure out whether you should pay estimated taxes in 2014?

In the following video, Dan Caplinger, The Motley Fool's director of investment planning, goes through the basics of estimated tax payments and who should make them. Dan notes that to avoid penalties, you generally have to have 90% of your tax liability withheld through payroll withholding. If you don't, you'll need to make quarterly estimated tax payments in April, June, September, and January to make up the difference. Dan goes through a safe-harbor provision, though, that offers an alternative to making a guess about your current-year tax liability. Although the penalties aren't egregious, Dan concludes that they're unnecessary with a little planning.

Be smart about your taxes for 2014
Making sure you don't have to pay penalties and interest for failing to make estimated tax payments in 2014 is just one way you can cut your tax bill to Uncle Sam. In our brand-new special report "How You Can Fight Back Against Higher Taxes," The Motley Fool's tax experts run through what to watch out for in doing your tax planning this year. With its concrete advice on how to cut taxes for decades to come, you won't want to miss out. Click here to get your copy today -- it's absolutely free.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 25, 2014, at 9:13 AM, djm20 wrote:

    Write Congress in support of H.R. 3894, legislation that eliminates double taxation: taxes on Social Security benefits that were taxed when contributions were made by wage earners. Bill Clinton generously instituted this taxation during his Administration and in the interest of fairness, it is time to eliminate them.

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Dan Caplinger
TMFGalagan

Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world.

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